MARC has affirmed its AA- rating on Central Impression Sdn Bhd’s (CISB) outstanding RM60 million Fixed Rate Serial Bonds and concurrently revised the rating outlook to stable from negative.
The affirmed rating is driven by the credit strength of AEON Co (M) Berhad (AEON), a 51.7%-owned subsidiary of Japan-based AEON Co Ltd which has an established track record in the domestic retail industry. AEON is leasing CISB’s AEON Klebang shopping mall under a 10-year lease expiring in October 2025 with an option to extend for another five years. Under the lease agreement, the fixed lease payment eliminates CISB’s exposure to occupancy risk as well as sublease termination and sublease credit risks.
The revised outlook is premised on the easing of concerns on CISB’s ability to resolve its tax obligations. In addition to CISB’s shareholders’ irrevocable commitment to provide financial support for the tax payments, the rating agency notes that part of the proceeds from a new share issuance was utilised to partially repay the tax arrears, the balance of which will be addressed through an installment arrangement with the tax authority as has been done in the past.
In terms of lease payment, CISB has continued to receive RM18.3 million p.a. As at end-June 2022, the balance in its designated accounts of RM20.4 million is sufficient to meet its upcoming financial obligations of RM16.5 million in November 2022.
MARC Ratings takes comfort from the restriction of distributions by CISB to its shareholders if the post-distribution debt service cover ratio (DSCR) falls below 1.75x. Based on the unaudited financial statement for FY2022, CISB’s DSCR was 2.0x.